Answer all questions in full sentences. How does competition affect markets? Suppose you walked into a store selling running shoes. For each example below, briefly describe the variety and quantity of running shoes you would expect to find and the prices of the shoes. This store is one of eight independent stores selling running shoes in the city. This store is one of three stores selling running shoes in the city, but all three owners secretly work together to increase their profits. This store is the only one selling running shoes in the entire city. Then answer this question: Should the government take action to ensure that the highest level of competition exists in every market? Why or why not? Bell ringer 10/07 Answer all questions in full sentences.

4 Market Structures Perfect Competition: a market structure in which a large number of firms all produce the same product & no single seller controls supply or price Monopolistic Competition: market structure in which many companies sell products that are similar but not identical Oligopoly: Market structure in which a few large firms dominate a market Monopoly: Market in which a single seller dominates

In your group, create a poster that you can use to teach your market structure to the class. Be sure to include: Barriers to entry? Variety of goods? How many firms? Control over prices? Examples

Natural Monopolies A market that runs most efficiently when one large firm provides all of the output If a second firm entered, competition would drive down the market price & decrease quantity each firm could sell They won’t be able to cover their costs One or both will go out of business Ex.?

Natural Monopolies A market that runs most efficiently when one large firm provides all of the output If a second firm entered, competition would drive down the market price & decrease quantity each firm could sell They won’t be able to cover their costs One or both will go out of business Ex. Public water

Government Monopolies A monopoly created by the government Patent: gives a company exclusive right to sell a new good or service for a specific period of time Franchise: Contract issued by a local authority that gives a single firm the right to sell its goods within an exclusive market

Division of consumers into groups based on how much they will pay for a good Price Discrimination

Might not buy it otherwise Price Discrimination Targeted discounts Senior citizens Student Might not buy it otherwise